Brexit Bill and Retail Sales Boost Sterling

GBPUSD, H1

Sterling has posted about a 30 pip rally against both the dollar and euro on the above-forecast UK retail sales data, tracking UK yields higher. Cable logged a post-data peak at 1.3446, which is the loftiest level seen in a week, before settling lower. UK May retail sales beat forecasts, rising 1.3% m/m after upwardly revised 1.8% m/m growth in the previous month. The median forecast had been for a more moderate 0.5% m/m expansion. A sustained spell of sunny weather along with celebrations surrounding the royal wedding, which boosted spending in food and household goods stores, drove the upside surprise. The one-off nature of the out sized growth in retails suggest some caution is warranted in interpreting the data, especially after April data earlier in the week showing, most notably an unexpected deceleration in wage growth, a metric being closely monitored by the BoE, and sharply weaker-than-expected production and trade data.

GBPUSD has traded in line with the EURUSD as the USD initially rallied following FOMC announcement before quickly giving up its gains, and the short term H1 Cable chart returned to trend. 1.3450 and then R3 at 1.3488 are the next key resistance levels, with support at 1.3408 (R1), 1.3400 (psychological level) and 1.3380 (200 period moving average).

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